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Accountants the ‘linchpin’ in SME lending


No one is better placed to analyse the financials, and assess the risks and benefits.

By Malavika Santhebennur4 minute read
John Sgambelluri

Accountants are primed to assist SME clients with securing loans because of their grasp of business financials and risk mitigation strategies, the co-founder of one mentoring business said.


Accendo Financial partner John Sgambelluri said that because the commercial lending process had not been digitised to the extent of other lending segments, it still required an understanding of the intricacies of small-to-medium enterprise operations and financial performance.

“As such, accountants as a cohort absolutely have the want and the ability to deal with SME clients,” Mr Sgambelluri said.

“They know their SME client better than anyone else, particularly in the financial sense, so, they have the ability to understand the clients’ business through the lens of the financial statements.

“People who assess loan applications will probably never meet the borrower nor will they ever see the business. But what they will have is an application supported by financials. No one can interpret those better than the accountant who put it all together.”

Speaking to Accountants Daily ahead of the Accountants Daily Finance Day on 16 June 2022 in Sydney, Mr Sgambelluri said this knowledge could also accelerate the time lenders take to reach an initial credit decision (turnaround times) because an accountant was more likely to provide an accurate picture of a business’ financial performance and answer all of the lender’s questions.

“We don’t have enough influence from the accountant at the moment so the financial performance is not being understood and the risks aren’t mitigated. So, it is being knocked back by credit assessors because of the gaps in the loan application. The application goes to the back of the queue and settlements are being missed,” Mr Sgambelluri said.

“But if I had a loan application come to me with the accountant’s fingerprints all over it with the breakeven calculations on the investment, fact find, and details on the financials, they would go to the top of the class.”

Identifying the purpose of the loan

Mr Sgambelluri urged accountants to become involved with their SME clients’ borrowing journey from the beginning when they determine that they require a loan for various investments (for instance, replacing or purchasing a piece of equipment or purchasing a vacant piece of land).

The first step was for accountants to guide clients through their purchasing goals, what it would cost, and how much they would require each year to pay for that investment (either in sales or units).

When the client was comfortable with the repayment amounts and the expected level of return, accountants could begin the loan application process for them.

“One of the most important parts of the loan application is the purpose,” Mr Sgambelluri said.

“All lenders in general feel that this is a little bit light on in loan applications. What they really want to know in words and numbers is, ‘What is the benefit to the client? What are we doing and why are we doing this?’

“So, being able to conduct a simple breakeven analysis of customers, or the hours or sales is very beneficial.”

Accountants have lender support

Lenders were highly supportive of accountants becoming key contributors to the SME lending process because of their ability to understand the clients’ business through the lens of their financial statements, he added.

“If you think about what’s required in the loan process, the accountant is the linchpin in all of it,” Mr Sgambelluri said.

“They’re the ones providing the historical financial data, reviewing and approving management accountants, and doing projections.”

Accountants would be required to undertake a discovery process with their SME clients and ask questions that provided insights about the business, including size and industry, and the stage or cycle it was in (growing or maturing).

Alongside this, it was critical to not only map the past of the business, but identify its goals and prospects for the next 12-18 months.

“You’ve got to have a set of questions to have really good conversations,” Mr Sgambelluri said.

“Ask them what they would do if they had unlimited access to capital. With that one question, you’ve got their goals and aspirations, and their risk profile. You also know what they believe their capacity is.”

Mr Sgambelluri will speak at the Accountants Daily Finance Day about the SME loan process and offer accountants insights into lender expectations, including their approach to credit.

He will also provide practical tools for accountants to conduct business health checks, identify SME growth opportunities to secure funding approval, learn how lenders determine SME loan approvals, and how to shape an SME for long-term success.

To register for this free half-day event, click here.

For more information about the finance day, including agenda and speakers, click here.

Accountants the ‘linchpin’ in SME lending
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